Prof G Markets: Detailed Summary of "Who Will Replace Jerome Powell? Tesla Hit with Securities Fraud Suit & AMD’s Q2 Earnings"

Release Date: August 6, 2025

Introduction

In this episode of Prof G Markets, hosted by Ed Elson and part of the Vox Media Podcast Network, the discussion centers around three pivotal topics affecting the capital markets: the potential successor to Federal Reserve Chair Jerome Powell, the latest securities fraud lawsuit against Tesla, and Advanced Micro Devices' (AMD) second-quarter earnings report. The episode delves deep into each subject, providing insightful analysis and expert opinions to help listeners navigate the complexities of today's financial landscape.

1. The Search for Jerome Powell’s Successor

Key Discussion Points:

• Current Scenario: With Jerome Powell's term as Federal Reserve Chair ending next May, speculation is rife about his successor. Former President Donald Trump is anticipated to play a significant role in the selection process, amid his ongoing criticisms of Powell and the Federal Reserve's monetary policies.

• Potential Candidates: Trump has confirmed a shortlist of four candidates, explicitly excluding Scott Besant. Two of the prominent names mentioned are Kevin Hassett and Kevin Walsh, with Christopher Waller, a current Fed governor, rumored to be another contender.

• Trump’s Strategy: There is speculation that Trump might appoint a shadow chair to influence Powell's decisions, potentially pressuring him to cut interest rates. This could serve as a testing ground for Trump's preferred candidate without undergoing the full confirmation process.

Notable Quotes:

• Ed Elson [01:51]: "Who will be the next Fed chair? That is the question that Wall Street is asking this week..."

• Ed Elson [08:20]: "Kevin Walsh is definitely more qualified than the other Kevin, but definitely a bit of a pander or two."

Candidate Profiles:

• Kevin Hassett:

  • Background: Former economist in the Fed’s Research and Statistics department, consultant to the Treasury under Clinton and Bush, and author of the controversial book Dow 36,000.
  • Controversies: His prediction of the Dow Jones reaching 36,000 by 2004 was markedly wrong, coinciding with the dot-com bubble burst. Additionally, his COVID-19 death model, predicting a peak and resolution by May 2020, proved inaccurate.
  • Current Standing: Recently reappointed to lead the National Economic Council under Trump, making him a frontrunner for the Fed Chair position.

• Kevin Walsh:

  • Background: Served on the Federal Reserve Board of Governors (2006-2011), worked at Morgan Stanley, and played a pivotal role during the 2008 financial crisis as a liaison between the Fed and Wall Street.
  • Criticisms: Misjudged inflation trends during the 2008 crisis, predicting deflation instead of the eventual economic scenario.
  • Current Influence: Active critic of Jerome Powell, advocating for rate cuts and aligning closely with Trump’s economic viewpoints.
  • Personal Note: Married to Jane Lauder, heiress of the S.N. Lauder fortune, adding an interesting personal dimension to his profile.

• Christopher Waller:

  • Background: Current member of the Fed’s Board of Governors, former research director at the Federal Reserve Bank of St. Louis, and academic roles at multiple universities.
  • Positioning: Widely regarded as a top contender, especially after dissenting in the recent decision to hold rates steady and advocating for rate cuts.

Conclusion: Ed Elson concludes that Kevin Walsh appears to be the leading candidate given his qualifications and alignment with Trump’s preferences, while acknowledging Christopher Waller's emerging candidacy.

2. Tesla Faces a Securities Fraud Lawsuit

Key Discussion Points:

• Nature of the Lawsuit: Shareholders allege that Elon Musk and Tesla overstated the capabilities of their robotaxi service, misrepresenting it as fully autonomous when, in reality, it still required safety drivers. The lawsuit claims these misrepresentations were intended to inflate Tesla's stock price artificially.

• Scope of Litigation: This marks another addition to Tesla's extensive list of approximately 2,000 global lawsuits. The current suit specifically targets the misinformation surrounding the robotaxi's readiness and safety features.

• Expert Analysis: Columbia Law School's Professor John C. Coffey Jr. provides insights into the lawsuit's viability.

Notable Quotes:

• Ed Elson [15:16]: "This was another case of Elon making vague promises about what is probably possible or potentially achievable."

• Professor John C. Coffey Jr. [13:09]: "To succeed, you have to show that it was done with an intent to defraud... which is very difficult and is usually the primary obstacle."

Expert Insights:

• Jurisdiction Challenges: The lawsuit is filed in the Western District of Texas, part of the Fifth Circuit, known for its skepticism towards securities fraud claims. A significant percentage of such cases are dismissed early on.

• Proving Fraud: Plaintiffs must demonstrate not just misinformation but also an intent to defraud investors. This high threshold makes the lawsuit's success uncertain.

• Market Reaction: The stock only dropped by 6% post-incident, which Professor Coffey suggests may not definitively link the decline to the robotaxi's performance, as such fluctuations are common due to various factors.

Ed Elson’s Takeaway:

While acknowledging Elon Musk's tendency to overpromise, Ed Elson surmises that the lawsuit is unlikely to succeed due to the stringent requirements to prove intent to defraud. Nevertheless, the lawsuit highlights a broader concern among investors about Tesla's ability to deliver on its ambitious robotic taxi promises, especially when compared to competitors like Waymo.

3. AMD’s Second Quarter Earnings Report

Key Discussion Points:

• Financial Performance:

  • Revenue: AMD reported a 32% year-over-year revenue increase, particularly strong in data center sales, which rose by 14% to $3.2 billion.
  • Earnings: Missed on Earnings Per Share (EPS) but exceeded revenue expectations.
  • Market Context: Despite the solid growth, AMD's data center revenue pales in comparison to Nvidia's $80 billion, up 73% year-over-year.

• Impact of US-China Relations:

  • Export Restrictions: US-imposed restrictions on advanced chip exports to China led to $800 million in inventory-related charges for AMD. Although these restrictions have been lifted, AMD's application to resume sales in China remains pending.

• Stock Performance:

  • Current Standing: AMD is the best-performing chip stock of 2025, up 45% year-to-date, outperforming Nvidia's 30% rise. However, it still trails behind Nvidia's dominant 95% market share in the GPU sector.

• Future Outlook:

  • Forecast: AMD provided a robust forecast, guiding revenue nearly 5% above estimates, excluding potential China sales.
  • Market Share Goals: Aiming to increase its enterprise data center market share from 5% to approximately 10-11% by 2026 with new rack-scale solutions.

Notable Quotes:

• Ed Elson [25:14]: "Investors are very excited about this company despite being behind in terms of the GPU market share."

• Patrick Moorhead [26:25]: "The one thing that was weighing on the stock prior was AMD stopped distinctly calling out the size of their data center GPU business."

Expert Analysis with Patrick Moorhead:

• Growth Drivers: AMD's significant revenue beat and upward revision in guidance signal strong growth prospects. The introduction of rack-scale solutions integrating CPU, GPU, and networking components positions AMD favorably against Nvidia.

• Comparative Valuation: Despite trailing Nvidia in GPU market share, AMD's lower revenue numbers relative to its market cap suggest room for growth, which investors are capitalizing on.

• Potential for Trillion-Dollar Valuation: Achieving a trillion-dollar market cap would require substantial market share gains and overall market expansion, particularly in the data center and AI GPU segments.

Leadership Spotlight: Lisa Su

• Role in AMD’s Revival: Lisa Su has been instrumental in turning around AMD from near bankruptcy to a leading position in the CPU market with the successful launch of the Zen architecture.

• Management Style: Described as conservative, execution-oriented, and disciplined, Lisa Su focuses on strategic decisions that drive immediate and long-term growth.

• Personal Connections: Notably, Lisa Su is related to Jensen Huang, CEO of Nvidia, which adds an intriguing dynamic to the competitive landscape between AMD and Nvidia.

Notable Quotes:

• Patrick Moorhead [31:15]: "Lisa is very conservative. She is a show-me person, meaning she's not going to make boisterous claims that she doesn't have a very high confidence."

• Ed Elson [33:30]: "Lisa's a great person and we love her."

Conclusion:

Despite facing stiff competition from Nvidia and challenges related to US-China trade relations, AMD's strategic initiatives and strong financial performance position it as a formidable player in the chip industry. With continued innovation and market expansion, the company is on a trajectory that could potentially see it join the ranks of trillion-dollar tech giants.

Closing Remarks

Ed Elson wraps up the episode by thanking guest Patrick Moorhead and reiterating the key takeaways from the discussions on the Federal Reserve’s future leadership, Tesla's legal challenges, and AMD’s impressive earnings. The episode underscores the importance of staying informed and critically analyzing market developments to build financial literacy and security.

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